Economists said the U.S. dollar weakened the most against the South African rand and the British pound, forecasting that consumer confidence fell this month to a two-year low. Why so glum? The Fed has cut its benchmark rate three times to 4.25 percent this year to prevent the worst housing slump in 16 years from tipping the economy into recession.
Simon Derrick, London-based chief currency strategist at Bank of New York Mellon Corp., summarized the situation, saying “We expect the dollar to continue to be undermined in the near-term. Headlines out of the U.S. remain mostly negative. House prices continue to fall, and data today is unlikely to change the perception that the U.S. economy is not doing well.”
The dollar traded at $1.4499 per euro as of 10:44 a.m. in London, after falling to $1.4515, the lowest since Dec. 14, from $1.4489 yesterday. The U.S. currency was little changed against the yen at 114.32. The euro was at 165.83, from 165.68.
The dollar has dropped 9 percent against the euro in 2007, compared with last year's 10.2 percent loss. Citigroup Inc., the nation’s largest bank, predicts U.S. currency will fall to $1.57 per euro by the end of March 2008. Meanwhile, interest-rate futures on the Chicago Board of Trade indicate 68 percent odds the Fed will reduce its benchmark rate a quarter- percentage point to 4 percent at its Jan. 30 meeting.